According to the government, the updated definitions will make it easier for businesses to conduct business.
The capital and turnover requirements for “small” businesses have been doubled by the government.
The Ministry of Corporate Affairs announced in a notification dated September 15 that the definition of “small” firms under the 2013 Companies Act would be expanded to encompass businesses with paid-up capital under Rs. 4 crore and annual revenues up to Rs. 40 crores.
Previously, the paid-up capital and turnover thresholds were set at Rs 2 crore and Rs 20 crore, respectively.
The new thresholds are effective right now.
The government listed several advantages for small businesses as a result of the revised definition, including I the elimination of the requirement to prepare a cash flow statement as part of the financial statement; (ii) the benefit of preparing and filing an abbreviated annual return; (iii) the elimination of the requirement for an auditor to rotate regularly; and (iv) the holding of only two board meetings per year.
“Small companies represent the entrepreneurial aspirations and innovation capabilities of lakhs of citizens and contribute to growth and employment in a significant manner. The Government has always been committed to taking measures which create a more conducive business environment for law-abiding companies, including reduction of compliance burden on such companies,” the corporate affairs ministry said in a statement on September 16.